Author Topic: What to do with a windfall  (Read 2188 times)

KYFIRE

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What to do with a windfall
« on: June 27, 2021, 08:43:09 AM »
I got a roughly $40k windfall recently.  The majority from a stock sale and the other in cash.  With the absurdity of the world right now, not sure what's the best route to use it. 

Invest:  Seems like tempting fate right now.  Are we at a peak?  Of course long term always going to gain but in short term I see a high risk of heading down.

Property - housing:  Been toying with buying a rental.  Rates are great but prices are high.  Is now the time?  I don't think prices will drop to pre COVID again but what happens when supply returns?  Also, will the accompanying rental prices stay inflated?

Property-commercial:  I found a retail space in a developing part of town so seems like low vacancy risk but I  still need to learn a lot about how to lease, insure, etc. 

Home Improvements:  Material costs and lead times are insane.   Also, with twin 2 year olds I just don't have the time to do so would have to pay someone for most items. 

Wondering what the thinking is right now.


Dicey

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Re: What to do with a windfall
« Reply #1 on: June 27, 2021, 10:25:41 AM »
Can't give you good answers without knowing more about your overall financial situation. Got any debt? Are you maxing out every possible retirement vehicle? Creating a case study would help us give you better advice.

Pro Tip: The world is always absurd. You can spend your life being afraid or you can learn how to be nimble.

Villanelle

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Re: What to do with a windfall
« Reply #2 on: June 27, 2021, 02:09:29 PM »
I'd look at my IPS and see what it said.

In my case, that would be investing in mutual funds, regardless of what the market is doing. 

Wolfpack Mustachian

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Re: What to do with a windfall
« Reply #3 on: June 27, 2021, 03:25:27 PM »
Just echoing what everyone else is saying. Have a savings/investment/debt repayment plan, and stick to it. That'll help you no matter what your situation is.

As always, this is helpful:

https://forum.mrmoneymustache.com/investor-alley/investment-order/


Sibley

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Re: What to do with a windfall
« Reply #4 on: June 27, 2021, 04:32:55 PM »
Do you have to pay tax on any of that? Make sure to plan for it if so.

RWD

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Re: What to do with a windfall
« Reply #5 on: June 27, 2021, 06:28:06 PM »
I'm sure you saw this coming:

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
Spoiler: show

5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/

KYFIRE

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Re: What to do with a windfall
« Reply #6 on: June 27, 2021, 07:33:07 PM »
Thanks for the responses.  Maybe jumping the gun on rental but also see @RWD's point.

@Dicey, yeah I've been thinking to do a case study.  Abridged version below.

@Wolfpack Mustachian, I've been studying that list.  Step 1-3 completed.  Steps 4 and 5 can be done this year.

@Sibley, that's after factoring in taxes on the gains


Abridged Case Study:

38, married with 2 kids. 

Income:  $190k before OT and Bonus; ~20% take home left over after taxes, 401k, other deductions.  Will improve after kids get done with day care.

Debt: 

House - $284 @ 2.5% [Refinanced last year; ~$160k equity]
401k Loan - $23k @ 4% [Must be paid in full to close]
Camper - $13k @3.5% [This is already on next on list to pay off]

Investments:

401k - $760k
Taxable Accounts - $146k
No Roths/IRA yet


Morning Glory

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Re: What to do with a windfall
« Reply #7 on: June 27, 2021, 07:51:03 PM »
I would be really tempted to pay off the non-house debt, but investing is also a good choice. I would not muck around with rentals if I had 2 year old twins.

I just dumped 250K from my house sale into VTSAX the other day. Easiest decision ever. I'm seriously worried more about getting some higher yield on the other 50K that I want to keep for a down payment on the next place. I'm really tempted to just dump that into VTSAX also, taking the risk that I might have to rent longer if the market drops.

Why do you have a 401K loan anyway? and how much is your annual spend? Just curious.

KYFIRE

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Re: What to do with a windfall
« Reply #8 on: June 27, 2021, 08:07:06 PM »
Yeah, they keep me busy as it is!

Annual spend is ~$94k including the $22k for day care.

The 401k loan originally taken for down payment on current house 6 years ago.  Primarily wanted to avoid contingency on having to sell the old house (very hot market at the time and also before finding this site).  Instead of paying off the loan I put into the market.

AccidentialMustache

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Re: What to do with a windfall
« Reply #9 on: June 27, 2021, 09:52:51 PM »
Crush the 401k loan. If you end up laid off/quit/etc that comes due essentially immediately.

Consider getting into 529s for your kids if you want to pay for some of their schooling (college or otherwise).

Between those two you'll probably only have 10-15k left. Do you have a healthy emergency fund? If so, its a lot less cash than 40k, dump it in an index, or DCA it into an index, as you see fit.

Dicey

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Re: What to do with a windfall
« Reply #10 on: June 27, 2021, 11:11:29 PM »
I'm sure you saw this coming:

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
Spoiler: show

5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/

OMG RMG, you do the best lists!
And +1 on crushing the 401k loan ASAP. Seriously, very first thing.
« Last Edit: June 27, 2021, 11:13:53 PM by Dicey »

Wolfpack Mustachian

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Re: What to do with a windfall
« Reply #11 on: June 28, 2021, 05:39:30 AM »
OMG RMG, you do the best lists!
And +1 on crushing the 401k loan ASAP. Seriously, very first thing.

When I see RWD's posts like this, I want to start a chant - R...W...D    R...W...D lol. Such a good practical example of the importance of not waiting.

Also, definitely pay off the 401K loan, in my opinion.

ender

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Re: What to do with a windfall
« Reply #12 on: June 28, 2021, 07:23:09 AM »

yachi

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Re: What to do with a windfall
« Reply #13 on: June 28, 2021, 09:08:08 AM »
The majority from a stock sale and the other in cash.
I'm not sure why you sold the stock before knowing what you wanted to do with the money.  How do you make that decision?  If you didn't sell if because you found a better opportunity, and you didn't sell it in order to fund living expenses, then you thought cash would do better than the stock you owned? 

MrThatsDifferent

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Re: What to do with a windfall
« Reply #14 on: June 28, 2021, 10:04:29 AM »
I’d pay off the 401k loan and the camper and use the remaining $4k to take the family on a long vacation because it’s been a rough 18 months and everyone deserves a break.

Villanelle

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Re: What to do with a windfall
« Reply #15 on: June 28, 2021, 10:19:54 AM »
401k loan is both a higher interest rate and a higher risk profile than the camper.  Why wouldn't you pay that off first?

I'd crush that loan with the windfall, but also require myself to do at least a few months of very, very low spend to sort of make as much of that back as possible.  It's hard to commit to a $40 entertainment budget in perpetuity, but to do it for 2-3 months?  Easy!  You find cheap free entertainment in your area and explore that.  Same with a few months of low grocery spending.  You can eat the same 5-8 cheap meals for dinner for a month or two. 

Oh, and I'd sell the camper as well unless you are realistically going to use it, with twin toddlers, at least 3-4 times a year.  You can rent a camper for a week if you want to use it. 

Morning Glory

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Re: What to do with a windfall
« Reply #16 on: June 28, 2021, 11:16:45 AM »
+1 on selling the camper, unless you use it every weekend or something.

I would love to see a breakdown of your other 72k of annual spend, if you have time.

KYFIRE

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Re: What to do with a windfall
« Reply #17 on: July 01, 2021, 05:01:24 PM »
Thanks all for the feedback and suggestions.

The camper is definitely something that has been hard to use this year just because the twins are wild but we were able to make many trips before they became mobile and expect once they get a little older it will return to a lot of fun.  We got because we enjoyed camping before the twins and thought it would make easier (some mixed results there) and is something we get to do with extended family so gonna stick it out a little longer.

Before last year's repairs (New Roof, HVAC, water heater, patio door) I was putting some money aside within my Betterment account earmarked for the 401k loan since requires lump payment so I will explore paying that first.  I'm not really worried about layoffs (famous last words right!?) so urgency to me for that has not been as high though hence why was looking at other opportunities.

Looks like I need to spend more time refining an investment plan (I've only got the peach fuzz).

meadow lark

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Re: What to do with a windfall
« Reply #18 on: July 01, 2021, 06:04:29 PM »
I think paying off the 401k loan is a great idea because it is both paying off a debt and a way to get $40k into a mutual fund at the same time.  Fabulous!